Launch Release • December, 2012
Veolia Water, Table Rock Capital and Ullico affiliate deliver solution to strengthen California city’s finances, create jobs and deliver sustainable water services
In contrast to numerous cities facing financial challenges, the City of Rialto, Calif., has just finalized an agreement securing approximately $35 million in cash, funding future water and wastewater system improvements and associated jobs, and gaining the expertise of a professional water company to deliver system and service improvements. The city’s new public-private concession is demonstrating a way for other cities to strengthen their financial condition while improving infrastructure services and creating jobs. This blue growth approach – sustainable water management practices that support a community’s economic growth and social stability – could serve as an important model for cities across the country struggling with substandard infrastructure systems, a lackluster economy and dwindling revenues. It’s especially relevant in California, where just last week, San Bernardino became the latest city to file a bankruptcy plan.
Through a public-private concession agreement commonly utilized in Europe and Asia but less commonly used in the United States, the City of Rialto and its concessionaire Rialto Water Services (RWS) have hired Veolia Water North America (Veolia Water) to manage the city’s water and wastewater systems while still maintaining public ownership and public control of rates.
The Veolia Water contract is part of a public-private concession agreement signed earlier this year by the City of Rialto and Rialto Water Services. Rialto is utilizing the new funding source for various long-term economic development projects including the area’s Airport Redevelopment Project. The city compared providing water services through its existing water and sewer agency, and through the selected alternative delivery model.
The new 30-year contract with Veolia Water essentially represents the life of the concession agreement. RWS will manage the Veolia Water contract and oversee the five-year, $41-million capital improvement program increasing the cost efficiency, compliance, water quality, and reliability of the city’s wastewater and water systems for the life of the concession. The capital improvement program is expected to generate 445 construction jobs. All affected city employees have accepted positions at Veolia.
The RWS concession refinances the city’s aging water and wastewater systems without privatizing those assets, and provides the capital necessary to fix and replace water and sewer lines, develop necessary new infrastructure and seismic upgrades, improve cost efficiencies, and provide lease payments back to the city, supporting additional economic development and local jobs. Rialto retains full ownership of the water and wastewater systems, control and ownership of the water supply and water rights, and transparent public authority over all rate setting. Veolia Water was a natural choice as operator, considering the company’s 40-year history in California and 9 years providing environmental services and employment to Rialto residents as operator of the city’s wastewater plant and collection system.
“The RWS partnership ensures that the city’s water and wastewater infrastructure is upgraded and run in the most cost-efficient manner, while also laying the groundwork for new economic development,” says Rialto City Administrator Mike Story. “We’ve worked with Veolia for years in the community and this arrangement allows for both continuity and improvement in the water resource and wastewater service, and it assures us that the total commitment to the residents of the City of Rialto is met.”
Under the contract, Veolia Water will operate and manage (O&M) a sewer collection system consisting of more than 260 miles of pipeline, six lift stations, and a wastewater treatment plant currently operating at approximately eight million gallons per day. Veolia Water will also provide O&M services for the city’s water system, with a total user population estimated to be approximately 50,000. The water system includes five water reservoirs, distribution, eight groundwater wells, and related pumping infrastructure.
“We’ve worked with Rialto for almost 10 years and have established a relationship of trust that supports the community’s economic vitality,” said Laurent Auguste, president and CEO, Veolia Water Americas. “Rialto is taking the right step in restoring and improving its infrastructure, and we’re excited for the opportunity to help them through our new and expanded role.” The financial backing and structuring of Rialto’s groundbreaking public-private concession was provided by San Francisco-based Table Rock Capital, led by Peter Luchetti. Table Rock and an affiliate of Ullico, Inc., the nation’s only labor-owned insurance and investment company, provided equity financing with additional parties providing debt financing on the approximate $172 million in total financing. The financing consists of $25.8 million (15%) equity and $146.3 million (85%) debt in the form of a 30-year private placement with a 5.5% semi-annual coupon. Placement agents for the debt are Barclays, and Goldman Sachs.
“With the loss of redevelopment funding, creative partnerships such as these are increasingly critical to communities who want to restore infrastructure, gain efficiencies, and get a competitive edge when it comes to creating jobs and economic growth,” said Luchetti.